7 benefits for Income Tax Payers in Budget 2019 | Explained with Examples

Following changes have been proposed to be implemented from FY 2019-20 for individual Tax Payer perspective.

1. Full Tax REBATE for the taxpayers having taxable income up to Rs. 5,00,000.

Please note that, there is no change in the basic exemption limit. Therefore, tax slab rates are kept unchanged.

Government has offered full tax rebate up to taxable income of Rs. 5,00,000 under section 87A. Till now, Tax Rebate up to Rs. 2,500 is available if the net taxable income of the taxpayer is Rs. 3,50,000 or less. Now, Finance Minister has proposed to allow full tax rebate if the taxable limit is Rs. 5,00,000 or less.

Here taxable income means, net income after claiming all the deduction under section 80C to 80U.

How will this impact?

For taxpayers below 60 years:

Particulars

Tax Rate

Reference

Taxation till Now

Proposed Taxation

Net Taxable Income after deductions

A

Rs. 3,50,000

Rs. 5,00,000

Tax Payable

(i) Up to Rs. 2,50,000

0%

B(i) + B(ii)

Nil

Nil

(ii)Rs. 2,50,000 – Rs. 5,00,000

5%

Rs. 5,000

Rs. 12,500

Total Tax Payable

B = B(i) + B(ii)

Rs. 5,000

Rs. 12,500

Less: Rebate under section 87A

C

(Rs. 2,500)

(Rs. 12,500)

Tax Payable after Rebate

D = B – C

Rs. 2,500

Nil

For taxpayers from 60 years to 80 years:

Particulars

Tax Rate

Reference

Taxation till Now

Proposed Taxation

Net Taxable Income after deductions

A

Rs. 3,50,000

Rs. 5,00,000

Tax Payable

(i) Up to Rs. 3,00,000

0%

B(i) + B(ii)

Nil

Nil

(ii)Rs. 3,00,000 – Rs. 5,00,000

5%

Rs. 2,500

Rs. 10,000

Total Tax Payable

B = B(i) + B(ii)

Rs. 2,500

Rs. 10,000

Less: Rebate under section 87A

C

(Rs. 2,500)

(Rs. 10,000)

Tax Payable after Rebate

D = B – C

Nil

Nil

In short, the rebate amount of Rs. 2,500 is increased up to Rs. 12,500. Here it is important to understand that,

Taxpayers having net taxable income more than Rs. 5,00,000 (after deductions), shall not be eligible to claim this rebate. Those taxpayers shall pay tax as per normal tax slab rates.

Similarly, those taxpayers who are availing tax rebate must file their income tax return if the Gross Total Income exceeds the basic exemption limit applicable to them.

2. In case of Salaried employees, Standard Deduction has been increased from Rs. 40,000 to Rs. 50,000

Last year, Government replaced exemption of conveyance allowance (Rs. 19,200) and medical allowance (Rs. 15,000) with standard deduction of Rs. 40,000. This year, Finance Minister has proposed to increase the limit of Standard Deduction by Rs. 10,000. Now, standard deduction from salary or pension income shall be Rs. 50,000.

How will this impact? –Rs 10k will be reduced from your taxable income. This is applicable for all tax payers (even for higher tax slabs)

3. If a taxpayer has two house properties and other property is vacant, then no tax will be collected on a notional rent.

In case of deemed let out property (i.e. the property which is neither self occupied nor given on rent), taxpayer had to pay tax on notional rent or deemed rent (which is not actually received but assumed to be received). Now, Finance Minister has proposed to exempt tax on such notional rent of second property.

Example

Mr. Anup has two house properties in his name. One property is self occupied and other property is vacant (or is a vacant plot). He has not given it on rent. Now, Up to FY 2018-19, he had to disclose the notional rent and pay tax on the same. From FY 2019-20 this practice has been discontinued for the second property. Now, suppose, Mr. Anup owns three house properties, and two properties are deemed let out / vacant. Then, in such case, only one property out of the two shall be exempted from tax. He must show notional rent on the third property and shall pay tax on the notional rent.

4. Threshold Limit of TDS on FD & RD interest increased to Rs. 40,000

Till now, TDS @ 10% is deducted on FD / RD interest, if the interest received during the year exceeds Rs. 10,000. Now, Finance Minister has proposed to raise this threshold limit to Rs. 40,000 instead of Rs. 10,000. It means, banks will deduct TDS @10% on FD interest only if FD interest during the year exceeds Rs. 40,000.

How will this impact?

Particulars

Reference

FY 2018-19

FY 2019-20

Interest Income

A

Rs. 40,000

Rs. 40,000

TDS @ 10% (Section 194A)

B

Rs. 4,000

Nil

Net Rent received

C = A-B

Rs. 36,000

Rs. 40,000

This will benefit those taxpayers, whose income is below basic exemption limit, but still had to file income tax return to claim refund on TDS on FD interest. As in the above example, till FY 2018-19, if TDS of Rs. 4,000 is deducted, taxpayer had to file return to claim TDS refund even if his taxable income is below taxable. From FY 2019-20, filing of return will not be necessary in the said situation.

5. Exemption limit of Gratuity is increased to Rs. 30,00,000.

Gratuity is one of the popular retirement benefit. According to the income tax provisions, Gratuity received up to Rs. 10,00,000 (Rs. 20,00,000 for Government employees) is exempt from tax till now. Finance Minister has proposed to increase this exemption limit from Rs. 10,00,000 to Rs. 30,00,000. Therefore, any amount of Gratuity received up to Rs. 30,00,000 shall be exempt from tax.

Example

Particulars

Reference

FY 2018-19

FY 2019-20

Taxable Income other than Gratuity

A

Rs. 10,00,000

Rs. 10,00,000

Gratuity Received

B

Rs. 30,00,000

Rs. 30,00,000

Less: Exempt

C

(Rs. 10,00,000)

(Rs. 30,00,000)

Gratuity Taxable

D = B-C

Rs. 20,00,000

Rs. 0

Total Income

E = A+D

Rs. 30,00,000

Rs. 10,00,000

Tax Payable

F

Rs. 7,12,500

Rs. 1,12,500

Rebate under section 87A

G

Nil

Nil

Tax Payable after Rebate

H

Rs, 7,12,500

Rs. 1,12,500

Tax Saving

Rs. 6,00,000

6. Capital Gain Exemption under section 54 extended to two house properties

Till now, a taxpayer can claim exemption under section 54, if he sells a house property and invests the capital gain amount into another house property. Only one house property was permitted to be purchased out of the capital gain amount. Now, Finance Minister has proposed to extend this limit to two house properties. It means, taxpayer can invest his capital gain amount into two house properties instead of one. However, this exemption can be availed only if the amount of capital gain is Rs. 2 Crores or less. Additionally, this benefit can be claimed only once in a life time.

Example

Mr. Anuj sells a house property for the first time and earned a capital gain of Rs. 1,80,00,000 (Rs. 1.80 Crores), then he can invest in two house properties and can claim exemption under section 54.

After a few years, he sells one of the purchased property and earns a capital gain of Rs. 60,00,000. Then to claim exemption under section 54, he can invest in ONLY ONE house property, because he has already taken the benefit of purchase of 2 house property earlier.

7. Threshold for TDS on Rent increased from Rs. 1,80,000 to Rs. 2,40,000

This provision is applicable mainly for the non-individual entities and individuals having tax audit under section 44AB. If the above mentioned taxpayers have taken any property on rent, and rent paid during the year is more than Rs. 1,80,000 then deduction of TDS @10% is must while paying rent to the landlord.

Now, finance Minister has proposed to increase this threshold limit of Rs. 1,80,000 to Rs. 2,40,000. Therefore, no TDS shall be deducted if annual rent paid is Rs. 2,40,000 or less.

And the individuals receiving rent from the above taxpayers shall receive the gross rent (i.e. without deduction of TDS) up to Rs. 2,40,000